Nigeria: TCN Contract Cancellation, Yet Another Setback?

The hiring of Canadian firm, Manitoba Hydro, to manage the Transmission Company of Nigeria (TCN) took the Bureau of Public Enterprises (BPE) five years and enormous resources to conclude. It was seen by industry watchers as a major step forward for the power reform process. The cancellation of the contract by President Goodluck Jonathan could well be a major blow to the reforms.

Managing Director of Manitoba Hydro International in Nigeria Mr. Don Priestman yesterday expressed shock over the reported cancellation of its management contract to run the Transmission Company of Nigeria (TCN) for a period of three years.

He said his company was yet to get any official correspondence terminating the contract has been but they only learnt of the development on the pages of newspapers.

In a telephone interview, Mr. Priestman said: "I haven't really received any formal notification yet. All I know is from the newspapers. So, we are also surprised and disappointed. We don't understand the reason behind it but we are just waiting to receive a formal notification. I was hoping that sense would prevail and that it was just a question of time. We were willing to give time for the right decision to be made so we could get out of it."

TCN is one of the successor companies created from the unbundling of the Power Holding Company of Nigeria (PHCN). It combines the functions of a transmission services provider, a system operator and a market operator, all of which are central to the sustainability and development of the electricity sector.

Priestman said his next step was to, "wait for instruction from my head office."

Nigeria is Africa's most populous nation of more than 160 million and holds the world's ninth-largest gas reserves but is blighted by power cuts which last several hours a day, forcing businesses and individuals who can afford them to rely on diesel generators.

The Federal Government is in the middle of privatizing the bulk of its power plants and distributing networks, in a reform process supposed to give foreign investors the confidence to provide the estimated $10 billion-a-year the electricity sector needs.

It all started with the 'forced' exit of Prof Barth Nnaji as power minister in August who investors and development partners said inspired confidence to invest.

Recently, the announcement of companies linked with controversial political money bags as preferred bidders for the unbundled units of the PHCN attracted hue and cry from stakeholders who expressed fear that they were being sold to government cronies.

An indication that all was not well with the TCN contract came to light on November 2, 2012 when Don Priestman spoke with newsmen at the West Africa Power Pool (WAPP) conference in Abuja, where he had raised alarm that two months after the contract was billed to commence, his firm was still waiting to get the 'delegated authority' from the federal government to start work as provided by the contract's terms.

Priestman had said: "The first month, August, was a transition month and according to the contract, starting the 1st of September, the schedule of delegated authority should have been issued, which would have given us full authority for running TCN. That has not happened. It's unfortunate. I think you will have to ask the authority why not.

"We are ready and keen to proceed, we have the people here, we know what to do, we have done something similar in other countries with success. So we hope there won't be much more delay before we can start doing what we came here to do. It's difficult to do a job when you are not in charge. Right now we are working closely and we are observing, we are making suggestions but we are not in control."

At the same event, however, the Permanent Secretary in the Ministry of Power, Mrs. Dere Awosika, who represented the Minister of Power, contradicted Priestman's position.

She told newsmen when asked to clarify Priestman's position: "Why do you think they are in this meeting? They are already working."

When further asked if Manitoba was being incorrect and whether the schedule of authority was already in place, she said: "Am not saying so. You want us to just throw out the issue without smoothening ends."

News, however, broke out on Tuesday night that President Goodluck Jonathan had cancelled the transaction. Reuters quoted Presidential spokesman Rueben Abati as confirming the cancellation of the transaction by President Goodluck Jonathan with immediate effect.

He was quoted as saying the power ministry would issue a statement as to why the deal was cancelled but till press time last night, the ministry had not.

The ministry's spokesman, Mr Greyne Anosike, told Daily Trust on phone that a statement would be issued after full briefing.

The BPE kept tight lips last night when asked to comment. Its spokesman, Chukuma Nwokoh, said 'no comment' when asked the bureau's reaction to the cancellation of the contract which took it five years to complete.

In September, when Manitoba was to resume as management contractors at the TCN head office in Abuja, PHCN workers stoutly resisted the move. They alleged their jobs were at risk given that the Federal Government had not finalized retirement and disengagement terms with them.

However, then minister of power, Prof Barth Nnaji, said Manitoba would bring only eight staff while existing indigenous staff would be in the shadow as deputies.

He said: "They (Manitoba) are not going to get rid of TCN workers but they will bring in a few people to work with the TCN people and more importantly, they will bring their expertise. They will bring in speed; be able to anticipate issues and problems and address them proactively. This is what we don't have in the public service."

The road to the appointment of Manitoba Hydro International of Canada has been long and tortuous. The process started five years ago by the Bureau of Public Enterprises (BPE) during the administration of President Olusegun Obasanjo in 2007.

Manitoba Hydro International won the bid to manage the TCN through a bidding process and consequently signed the $23.7 million management contract with the bureau last July. The Power Grid of India lost out in the bidding contest.

The process was stalled during the administration of late President Umaru Yar'Adua, who rolled back the power sector reform and privatisation programme.

However, when Jonathan took over in 2010 and launched the Power Sector Road Map that same year, the Federal Government directed the BPE to continue with the process from where it had been stopped, rather than re-advertising for prospective companies to express interest all over.

Reports suggested that the president's decision to cancel the contract was based on a memo sent by the Bureau of Public Procurement (BPP), which for several weeks, had been pushing for its cancellation on the premise that it did not pass through due process as provided under the Public Procurement Act.

Director General of the BPP Emeka Eze was said to have kicked against the appointment of Manitoba because a few material irregularities had been noticed in the process that led to the company's selection.

Eze was said to have informed the president through the memo that a management contract was distinct from a privatisation transaction or concession, and since the procurement of all Federal Government contracts, including those covering professional services are covered by the Public Procurement Act, the BPE should not have superintended the selection process.

Eze was also said to have insisted that if the BPP had overseen the procurement of the contractor, it is the Federal Executive Council (FEC) that should have approved the selection of Manitoba based on the bureau's recommendation.

The president has reportedly directed the Ministry of Power to handle the selection of a new contractor for TCN within 30 days.

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